In the dynamic world of investing, it’s easy to be swayed by the allure of well-known corporations and trending sectors. However, a group of astute investors, often referred to as the Warren Buffetts of India, possess a unique perspective, identifying opportunities that many overlook. These savvy individuals are on the hunt for promising investments in lesser-known companies that demonstrate exceptional capital efficiency, turning every rupee invested into substantial profits.
In this article, we will spotlight two small-cap companies that have garnered the interest of notable investors and may be poised for significant growth.
Vadilal Enterprises Ltd (VEL)
When you think of ice cream in India, Vadilal Enterprises Ltd is likely among the first brands that come to mind. Founded in 1985, Vadilal specializes in marketing and distributing ice cream, dairy products, frozen desserts, and processed foods. It ranks as the second-largest ice cream brand in India, commanding a 16% market share in the organized sector.
Impressive Financial Metrics
With a market capitalization of ₹689 crores, VEL boasts a remarkable Return on Capital Employed (ROCE) of nearly 39%. This figure indicates that for every ₹100 invested into the business, the company generates ₹39 in returns. Such efficiency allows Vadilal to reinvest in growth or reward shareholders with dividends.
- Comparison with Peers:
- Adani Enterprises: 9.9% ROCE
- Aegis Logistics: 15% ROCE
- Cello World: 36% ROCE
Sanjiv Dhireshbhai Shah, a prominent figure in Indian investing and philanthropy, has held a 6.64% stake in VEL since March 2016, reflecting his confidence in the company’s potential. The sales growth over recent years has been impressive, with a compounded annual growth rate (CAGR) of 12%.
Sales Growth Overview
| Year | Sales (₹ Cr) |
|---|---|
| FY19 | 57.36 |
| FY20 | 59.23 |
| FY21 | 34.05 |
| FY22 | 48.93 |
| FY23 | 90.99 |
| FY24 | 99.99 |
From a modest ₹13 crores in EBITDA in FY19, the company has grown to ₹14 crores by FY24, marking a CAGR of about 1.5%. Notably, net profits surged from negligible figures in FY19 to ₹8 crores in FY24, reflecting a staggering 137% growth.
Valuation Insights
Currently, VEL’s share price stands at ₹8,010, a remarkable 483% increase from its five-year low of ₹1,375. The company trades at a Price to Earnings (PE) ratio of 119x, significantly higher than its 10-year median of 50x and the industry average of 30x.
Prakash Pipes Ltd (PPL)
Established in June 2017 following a demerger from Prakash Industries Ltd, Prakash Pipes Ltd specializes in manufacturing PVC pipes, fittings, and packaging products. Recently, the company has expanded its operations into flexible packaging, setting up a state-of-the-art facility in Uttarakhand.
Strong Financial Performance
PPL has a market cap of ₹1,066 crores, coupled with a ROCE of 33%, outperforming competitors like Astral Pipes (23%) and Finolex Industries (11%).
- Investor Interest:
- Dolly Khanna has increased her stake from 1.35% in December 2021 to 3.71%.
- Mukul Agrawal holds a steady 2.51% stake since December 2023.
Sales Growth Analysis
| Year | Sales (₹ Cr) |
|---|---|
| FY19 | 34.13 |
| FY20 | 38.54 |
| FY21 | 47.66 |
| FY22 | 71.77 |
| FY23 | 96.69 |
| FY24 | 107.00 |
The sales figures for PPL have grown at a CAGR of 14%, while EBITDA surged from ₹39 crores in FY19 to ₹107 crores in FY24, indicating a robust CAGR of 23%. Profit after tax also rose significantly from ₹29 crores to ₹90 crores, highlighting a 26% growth rate.
Current Valuation
As of March 7, 2025, PPL’s share price is ₹446, showcasing a 230% increase from its five-year low of ₹135. The company currently trades at a PE ratio of 11x, slightly above its 10-year median of 8x.
Conclusion: Potential Worth Watching
Both Vadilal Enterprises and Prakash Pipes are demonstrating exceptional business practices that capitalize on efficient capital use. With established investors like Sanjiv Shah, Mukul Agrawal, and Dolly Khanna backing them, these stocks warrant attention.
As these companies continue to evolve, their performance will be fascinating to observe. Keeping these stocks on your watchlist could be a smart move, especially given the track records of their notable investors.
Disclaimer
This article aims to provide insightful data and perspectives on investment opportunities. It is not intended as investment advice. Please consult with a financial advisor before making investment decisions tailored to your individual goals and circumstances.
